Understanding Payroll Process
Payroll processing includes several activities given below:
It helps in developing policies for the salaries of the employees such as benefit policy, incentive policy, etc.
You need to define the structure of the payslip such as HRA, basic pay, etc.
You need to collect inputs from various departments and compile it. For example, cafeteria or canteen expenses.
You need to actually calculate the salaries of the employees based on gross pay, taxes, deductions, etc.
It is necessary to submit PG, TDS, etc. along with the relevant tax returns at the right time.
Simply put, the best payroll processing unit works step-by-step to calculate the net pay of the employee, submit taxes, and file returns.
Let’s understand in detail how this works:
Firstly, you need to create relevant policies for different aspects such as leave policy, attendance structure, deductions, etc.
Then, you should gather inputs from various departments such as revision data of salary, employee performance for incentive, etc.
Once you have this data which is necessary to calculate the salary of employees, you need to validate if this information is correct or not.
After validation, you need to conduct actual calculations of the salary or the net salary which is dispatched to the employees after deductions such as ESI, PF, and TDS.
This dispatched salary comes with the responsibility of returns. For example, TDS submission and return. At the end of every quarter, the employer needs to submit the PD, TDS, etc. to the relevant departments and submit returns of the same on a timely basis.
Once all these formalities are completed, every company needs to prepare payroll reports to understand the efficiency of the payroll department. These reports are necessary to understand the demands, requirements, error-percentage, etc.
Best Practices of Payroll
1. Align Pay Schedule
It is not uncommon for organizations to have different paydays for every type of employees. They may clear monthly salaries of permanent, full-time employees, bi-weekly payments to consultants, and weekly payments to freelancers. While this structure may seem feasible according to the employment of the employee, it is error-prone for the payroll processing unit. Reduce the paydays for employees and have a similar type of salary or payment structure for all types of employees. This will reduce the number of cycles and duplication of cycles, which will reduce the confusion or errors in the system.
2. Streamline your Payroll Processes
Undoubtedly, you may have purchased the best payroll processing system. But, if these systems are multiple, processing will be hard and a huge hassle. There is a reason most of the systems today offer integrations because it makes functioning simpler and helps in reducing the number of systems that your team has to deal with.
It is generally human nature to work best with simple systems. As you increase the number of systems for inputting, tracking data, orientation, training, etc., you keep increasing the complexity bit by bit. Your employees can get confused and you can end-up incorporating human errors in the system.
Sit with the important stakeholders, analyze the important payroll processes and functioning, and streamline your systems.
3. Upgrade Your Payroll Processing System
Nothing hurts a payroll processing unit more than outdated systems. If your payroll processes are running on technology which is age-old, you are more likely to observe grave errors in the system. This is because of multiple reasons:
Firstly, these old systems may not receive regular updates which means you can end up making compliance issues or calculations errors.
Secondly, old technology is less user-friendly than new technology. This means that your employees are probably spending more time on the payroll than they should.
Thirdly, this technology may not cater to the integration demands of the system, which means you need to have multiple systems for payroll processing. This brings us to the above point.
4. Use Paperless Payroll Process
If you are still using paper, you are practically reducing the efficiency of your system. Your employees may have to put in extra effort to take care of the piles of paperwork and other documents. Someone has to physically secure the documents from theft. Isn’t it just a waste of workforce and efforts?
It is not even healthy for the environment!
Hence, move to paperless methods. Every time you need to onboard an employee, simply ask them to complete formalities online. Integrate your biometric attendance system to your online payroll. No need for paper, payslips, and other documents. Shift everything online.
5. Ensure Compliance
Most of the payroll processes in a small or medium organization are not properly managed. This means that these organizations focus only on sending employee salaries. However, they should be focusing on payroll taxes as well. You can’t skip the taxes such as PF, TDS, ESI, etc. All these are necessary and mandatory according to Indian regulations. There is no way of skipping this requirement.
Yet, many organizations still ignore it and then pay penalties.
Have an expert on the team who can keep a tab of the regulations, which can reduce your compliance penalties to a great extent.
Outsource your payroll processing!
This is the best payroll processing solution that we can give you. Of course, you can utilize the above tips and best practices to improve your payroll process. But, nothing can match outsourcing and here’s why we believe this:
Outsourcing providers have a team of skilled professionals who understand payroll through and through. You don’t have to stay updated to trends. You only have to deliver your requirements.
Outsourcing the payroll process is cost-effective because you don’t have to manage employees or take care of their requirements in any manner.
They use high-tech tools that can help you streamline your processes without much hassle.
You can receive expert guidance, which means you don’t need an external factor to help you with best practices. You can take help from your outsourcing partner because they have the right people on the team to help you with it.
Impact of Wrong Payroll Process
A wrong payroll process can impact your reputation more than anything.
Imagine you have transferred the wrong salary to the employees or your company has faced a compliance penalty due to wrong TDS calculation or submission. Do you think your employees will trust you after this? It is unlikely for the employees to stay in an organization that is not efficient and effective in its working.
Many times wrong payroll calculations also lead to delayed salaries of the employees which also leads to reputation risk.
Would you work in an organization which delays your salary?
What if your employees have several dependents and they need the money?
The risks of poor payroll processing are just too high. It is not possible to get past the consequences of wrong payroll processes. There are just so many factors involved that this is one task of the company which needs to be apt.
If you ignore it, then this is what is going to happen:
You will end up delaying your payroll and salaries of employees. These employees will manage for one, two, or maybe six months. But, eventually, everyone will start getting frustrated and leave. Isn’t it something that you would do if you were in a similar job?
We all know the answer. So, instead of complicating the situation more, choose the best payroll processing route – outsource.
Payroll processing is already a complicated task with all the factors and calculations involved. If you further complicated it by not making good decisions, you will only end up losing the trust of your employees and other company stakeholders. So, eliminate the issues and outsource for hassle-free functioning.
Paysquare is a payroll outsourcing organization that has a skilled team and required technology. You can reach out to us anytime for support. Our team will get back to you with an effective payroll processing plan!